Taseko Mines Ltd (TSX: TKO) is a Canadian mining company principally engaged in the production and sale of metals, as well as related activities, including exploration and mine development, within the province of British Columbia, Canada, and the State of Arizona, the United States.

Investment highlights 

• Shared production and sales Figures for FY 2021: The company recently stated that its Gibraltar Mine generated 112 million pounds of copper in FY 2021 and generated sales of 105 million pounds. For the year, molybdenum production and sales totaled 2 million pounds. Furthermore, copper production in Q4 2021 was 29 million pounds. Lower grades and recoveries from ore mines in the top benches of the Gibraltar pit hampered production in the fourth quarter.
  

• Electric Vehicles – A rapidly emerging market: The growth of the electric vehicle sector will have a big influence for copper, with demand for the metal anticipated to rise by 1.7 million tonnes by 2027. Copper is being utilized to improve the efficiency of a variety of electrical technologies, from motors and transformers to solar and wind energy systems, as the world moves toward a more sustainable and energy efficient future.

• Robust copper prices: With the copper price today over USD 4.50 per pound, 30 cents higher than the average price in 2021, the company expects to maintain strong operating margins going forward. Sales of excess copper concentrate inventory from Gibraltar will further bolster Q1 2022 cash flows, which is a key positive.

• Higher cash flows from operations: The Pollyanna pit produced 34.5 million pounds of copper in the third quarter, up 29% from the second quarter, as better ore grades were mined and processed. Copper recoveries improved as the ore grade increased. As a result, the company's cash flows from operations increased to CAD 68.3 million in Q3 2021, up from CAD 31.0 million the previous quarter.

• Industry Beating Margins: The management’s solid determination and resilience of business helped them leaping the industry median margins on many fronts in Q3 2021, which indicates improved operational efficiency. The Chart below gives a glimpse of this.

Source: REFINITIV, Analysis by Kalkine 

Financial overview of Q3 2021 (In thousands of CAD)

Source: Company Filing 

• The company reported higher sales of CAD 132.6 million against CAD 87.8 million in the previous corresponding period. The rise in revenue was mainly due to higher production.
• On the back of lower production cost and lower depreciation expense, the company’s earnings from mining operations in the reported period increased to CAD 66.7 million compared to CAD 11.8 million in pcp.
• Income before income tax stood at CAD 44.8 million compared to CAD 0.4 million in pcp, partially offset by loss on foreign exchange.
• Despite higher income tax at CAD 22.3 million, the company reported its net income at CAD 22.5 million compared to CAD 0.9 million in pcp.
  

Risks associated with investment 

Copper price volatility has a substantial impact on the company's business. Additional inherent risks associated with mining and mineral processing include the possibility that the company's mines will not perform as expected; uncertainty regarding the company's ability to secure additional capital to execute its business plans; and the speculative nature of mineral exploration and development. 

Valuation Methodology (illustrative): Price to Cash Flow based

Analysis by Kalkine Group 

Stock recommendation

the company announced FY 2021, copper production from its Gibraltar Mine of 112 million pounds and sales of 105 million pounds while Q4 2021, copper production was 29 million pounds. Additionally, with the copper price today over USD 4.50 per pound, 30 cents higher than the average price in 2021, the company expects to maintain strong operating margins going forward, a significant plus.  Furthermore, as the number of electric vehicles grows, a new developing market is emerging, with metal consumption is estimated to rise by 1.7 million tonnes by 2027, which would be a key positive for the company. Moreover, the company has industry-leading margins, demonstrating its operational efficiency. Hence, considering the aforesaid facts and valuation, we recommend a 'Speculative Buy' rating on the stock at the last traded price of CAD 2.44 on February 2, 2022.

One-Year Technical Price Chart (as on February 2, 2022). Source: REFINITIV, Analysis by Kalkine Group 

Technical Summary Analysis:

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